A new energy company offering low-cost green power exclusively for Londoners will launch in December, the Mayor has announced.

London Power will guarantee tariffs in the cheapest 10 per cent of the market – and will not move customers to a pricier plan after the first 12 months.

The company will also offer 100 per cent renewable electricity, though its gas will not be from green sources.

Cheap power is a major problem for London. More than one million people in the capital live in fuel poverty, with the city spending £3.5 billion a year on energy bills.

The Mayor said his new company would offer a fairer deal for residents and the environment.

He said: “It is a sad fact that millions of Londoners struggle to pay fuel bills and are subject to inflated rates from major energy companies.

“My Energy for Londoners programme has concentrated on tackling fuel poverty, expanding solar energy and retrofitting homes.

“Now I want London Power to give Londoners a better, fairer deal on fuel prices, as well as the knowledge they won’t be switched over to a rip–off tariff when their contract ends.”

Almost six million people across the country switched energy provider last year, a new record as prices continue to rise – but Londoners are less likely to have made a change.

Deputy Mayor for the Environment Shirley Rodrigues said private companies benefited from this “tease and squeeze” approach, offering an initially low tariff before hiking it up after a year.

She said: “We want to make sure people are always rolled over onto the cheapest comparable tariff – that’s the way we can start to help people.”

London Power is a partnership between the Mayor and Octopus Energy, an existing private supplier which will provide the electricity and gas.

City Hall will make money from commission when Londoners sign up. This will be reinvested in community projects to tackle fuel poverty and make the capital a zero-carbon city.

But Conservative London Assembly member Tony Arbour accused the Mayor of going back on his manifesto pledge to create a not-for-profit energy company.

Mr Arbour claimed London Power is merely an “agent” for Octopus Energy, with the company benefitting from the publicity of working with City Hall.

He said if the new company makes profits it should reduce the cost of electricity for customer, not reinvest its surplus in community projects.

Speaking at the environment committee, he said: “The return that Octopus is going to get because the GLA has decided to take them on is going to have the most tremendous effect.

“Frankly, I take the view that the Mayor has totally gone back on his manifesto promise saying he was going to produce a not-for-profit company.”